Why Effective Policy Adjustment on Beijing’s Relief of ‘Non-Core’ Functions
Recently, China Development Bank (CDB) set up a special loan of 400 billion yuan to support the relocation of non-capital functions of Beijing has once again attracted the public’s attention. In fact, this news was officially reported on January 29, before Chinese Lunar New Year, Spring Festival. Because of the holidays, it escaped the market’s notice at that time. An then, it was increasingly more talked to give off heat.
According to the official announcement, CDB’s “relief loans”, from 2022 to 2025, will differentiate preferential policies given to key projects in terms of loan interest rates and terms, open a green channel for credit evaluation, improve the efficiency of examination and approval. Beijing will relieve non- capital functions along with the coordinated development of Beijing-Tianjin-Hebei towards connotative (intensive) development model.
In this regard, some of we-media gave a rather exaggerated interpretation to claim that the “relief loans” would assist Beijing’s centrally-administered enterprises, state-owned enterprises (SOEs) and public institutions in their large-scale relocation. First, is the “headquarters of central enterprises” will be removed from the six districts in Beijing to Xiong’an New Area or other regions. Second, Beijing’s “municipal SOEs, city-based companies and public institutions” will move from the city’s six districts to the sub-center of Beijing. Third, the development integrated Beijing’s sub-center with “Northern Three Counties” (Sanhe city, Dachang Hui Autonomous County and Xianghe County formed under the administration of Langfang prefecture-level city of Hebei province) that has been included in the key supporting areas among the “relief loans”. Some of we-media even said, after the “Two Sessions of CPPCC and NPC” held in March 2022, Beijing is likely to stage the largest wave of relieve on non- capital functions, which would kick off “great changes” in the city of Beijing.
However, researchers at ANBOUND noted that the above interpretation by we-media was overly exaggerated. Those words were as gimmicks designed to tempt eyes, as a result, that caused the market to misunderstand Beijing’s relief actions. Thus, it is imperative to make a clarification.
Let’s look at what the official media released. That is, CDB’s relief loans “will focus on supporting the relocation of all kinds of enterprises and public institutions within the six districts of Beijing city, resettlement in Xiong’an New Area of HeBei Province, affordable rental housing and a complete set of municipal public services, transportation network, ecological and environmental protection and other major projects, Beijing’s sub-center construction and integration development with “Northern Three Counties”, featured-theme industrial park construction located in Binhai New Area of Tianjin city, the interconnection of Beijing-Tianjin-Hebei transportation, the coordinated development of ecological protection, and others.”
In view of the above words, what the relief loans support for “non-capital functions” is mainly limited to the areas from the centers of Beijing city to the Beijing-Tianjin-Hebei regions and Xiong’an New Area, but not to relocate the enterprises, public institutions and economic factors from Beijing to other regions. It cannot be justified as a “large-scale relief wave”. In fact, it should do an analysis much logically. China Development Bank, as a policy bank headquartered in Beijing, unlikely take huge amounts of financial resources in guiding and encouraging economic resources to flow out of Beijing. That would have been regarded as a “demolition” to local economy of Beijing. China Development Bank and the three regions of Beijing-Tianjin-Hebei shall enhance communications on the relief of non-capital functions. It is required for them to reach to a certain “tacit understanding” one another. The economic factors relieved from the core urban areas of Beijing shall be as much as possible retained in the regions of Beijing-Tianjin-Hebei, which are main elements to facilitate the changes of development pattern. Definitely, not being largely dispersed to the East or the South of China, that would result in a “net loss” of economic factors for the Beijing and the region of Beijing-Tianjin-Hebei.
Since 2015 to date, Beijing’s relief of non-capital functions has been carried out for seven years, covering population, industries, enterprises and other economic factors. From the perspective of ANBOUND as an independent think tank, the relief work has achieved a lot. An appropriate reduction in policy’s intensity could be considered. If the “subtraction” of the relief goes ahead, it is likely to heavily hit the urban economy of Beijing.
Beijing is not only the nation’s capital, but also the largest super city in the northern China. ANBOUND’s tracking research subjected to Beijing has been conducted for a long time, which demonstrated an undeniable status for the city as the largest economic center and financial center in the northern China, albeit without a function of “economic center” defined for Beijing. In 2021, Beijing and Shanghai were the only two Chinese cities with the economic amount over 4 trillion yuan, respectively. The positioning on Beijing shall be multi-faceted, not only as a national capital that cannot undertake much non-capital functions, but also as an economic center in northern China that plays a crucial role supporting both the regional economy and the development of the north. It is worth noting that in recent years, the economic gap between the north and the south of China has constantly widen. Beijing, located in the North China Plain, is indispensable in driving and backing up regional economies of the North, Northeast, and Northwest China. If continuing with a high intensity to relieve the non- capital functions, it would have “broken bones” in Beijing’s economy. That means a collapse in the largest economic center in the northern China. In that scenario, sharply said, there will be great losses to the economic security in the north of China.
The economic factors, scientific and technological resources, and human resources relieved from Beijing shall be left for the region of Beijing-Tianjin-Hebei. It is not for the purpose to create a small circle, but for good reasons. Firstly, the Beijing-Tianjin-Hebei coordinated development is a major national strategy with the same importance as the integrated development of the Yangtze River Delta and the Guangdong-Hong Kong-Macao Greater Bay Area (differs greatly in economic level). The development of Beijing-Tianjin-Hebei is materialized to implement the national strategy. Secondly, as mentioned above, Beijing keeping a healthy economic growth and large economic scale that can narrow the economic gap between the north and the south of China. It is a buttress (pessimistically, also called as a “maintenance”) to give strength to the regional economic development in the north. Should Beijing’s status as a unique economic center in the northern China have been significantly undermined, it would lead to regional imbalances and tremendous social problems.
As an independent think tank, ANBOUND has been paying close attention to Beijing’s economic and urban development for nearly 30 years. Our research explains that in the past seven years, great achievements have been made in the readjustment of Beijing’s urban functions, the relief of non-capital functions, and the beautification and improvement of urban environment. The city’s livability and quality of life have significantly upgraded. In the future development, it is no doubt for Beijing to give more consideration on the urban economy and its important supporting role to the economic development in the northern China. Beijing’s systemic adjustment, which is characterized by relief and reduction, will be moving along with massive policy inertia. That is required to ensure high-quality resources constantly output to the Xiong’an New Area. For the city of Beijing, the relief of non-capital functions shall be in a tactical manner to slow down the pace and reduce the intensity. This is a big shift for either Beijing and the north of China.
Final Analysis Conclusion:
Beijing’s relief of non-capital functions has been going on for seven years. In the next phases, it is suggested that policymakers would make somewhat adjustment not at the expense of significantly weakening Beijing’s economic status.
Writer by ANBOUND
ANBOUND is a multinational independent think tank. We specialize in public policy research covering geopolitics and international relations, urban and social development, industrial issues, and macro-economy. We enjoy professional reputation in the areas of strategic forecasting, policy solutions, and risk analysis. Over the past three decades, we are committed to independence and openness as our operating principles.
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